Question 1

In the United States,________ percent of all firms are corporations.

Accepted Answer

A)  18 
B)  60 
C)  72 
D)  82 
A)  18 
B)  60 
C)  72 
D)  82

Question 2

In the United States,________ profits are taxed at both the corporate level and when investors receive dividends.

Accepted Answer

A)  a sole proprietor's 
B)  a partnership's 
C)  corporate 
D)  all of the above 
A)  a sole proprietor's 
B)  a partnership's 
C)  corporate 
D)  all of the above

Question 3

An unusual feature relating to corporate governance at Snapchat is that stock shares sold during its IPO

Accepted Answer

A)  were sold only to the company's early investors who had provided funds to the firm prior to the IPO. 
B)  were sold only to the company's two founders. 
C)  carried no voting rights for electing the board of directors. 
D)  were sold only to its previously announced board of directors. 
A)  were sold only to the company's early investors who had provided funds to the firm prior to the IPO. 
B)  were sold only to the company's two founders. 
C)  carried no voting rights for electing the board of directors. 
D)  were sold only to its previously announced board of directors.

Question 4

What does limited liability mean?

Accepted Answer

A)  The owners of the business are personally responsible for paying expenses incurred by the business. 
B)  Only employees can have a claim on the assets of the business. 
C)  The personal assets of the owners cannot be used to pay the firm's debts if the business is bankrupt. 
D)  Anybody with a liability against a firm can claim only what their liability refers to. 
A)  The owners of the business are personally responsible for paying expenses incurred by the business. 
B)  Only employees can have a claim on the assets of the business. 
C)  The personal assets of the owners cannot be used to pay the firm's debts if the business is bankrupt. 
D)  Anybody with a liability against a firm can claim only what their liability refers to.

Question 5

Unlike a sole proprietorship,a corporation's shareholders

Accepted Answer

A)  own the firm and directly manage it as well. 
B)  own the firm but do not directly manage it. 
C)  do not own the firm but directly manage it. 
D)  do not own the firm and do not directly manage it. 
A)  own the firm and directly manage it as well. 
B)  own the firm but do not directly manage it. 
C)  do not own the firm but directly manage it. 
D)  do not own the firm and do not directly manage it.

Question 6

Direct finance refers to the flow of funds from savers to borrowers through financial markets.

Accepted Answer

A) True 
 B)False

Question 7

Stockholders are the owners of which type of business?

Accepted Answer

A)  sole proprietorships 
B)  partnerships 
C)  corporations 
D)  all of the above 
A)  sole proprietorships 
B)  partnerships 
C)  corporations 
D)  all of the above

Question 8

Veruca sells therapeutic bath salts on the Internet.Her annual revenue is $52,000 per year,the explicit costs of her business are $14,000,and the opportunity costs of her business are $17,000 per year.What are the implicit costs of her business?

Accepted Answer

A)  $14,000 
B)  $17,000 
C)  $21,000 
D)  $31,000 
A)  $14,000 
B)  $17,000 
C)  $21,000 
D)  $31,000

Question 9

Which of the following would explain why accounting profit might be greater than economic profit?

Accepted Answer

A)  A firm has implicit costs as well as explicit costs. 
B)  A firm has only explicit costs. 
C)  A firm's net income is greater than its accounting profit. 
D)  A firm's net income is less than its accounting profit. 
A)  A firm has implicit costs as well as explicit costs. 
B)  A firm has only explicit costs. 
C)  A firm's net income is greater than its accounting profit. 
D)  A firm's net income is less than its accounting profit.

Question 10

Harry's Hookahs incurs $700,000 per year in explicit costs and $500,000 in implicit costs.The company earns $1.4 million in revenues and has $3.7 million in net worth.Based on this information,what is the accounting profit for Harry's Hookahs?

Accepted Answer

A)  $200,000 
B)  $700,000 
C)  $900,000 
D)  $1.1 million 
A)  $200,000 
B)  $700,000 
C)  $900,000 
D)  $1.1 million

Question 11

Dividends are the interest rates paid on stocks.

Accepted Answer

A) True 
 B)False

Question 12

Firms disclose financial statements in ________ and in ________.

Accepted Answer

A)  periodic filings to the federal government; annual reports to shareholders 
B)  daily filings to the federal government; daily reports to shareholders 
C)  monthly reports to shareholders; 5-year balance statements to the board of directors 
D)  weekly filings with the SEC; monthly reports to the Fed 
A)  periodic filings to the federal government; annual reports to shareholders 
B)  daily filings to the federal government; daily reports to shareholders 
C)  monthly reports to shareholders; 5-year balance statements to the board of directors 
D)  weekly filings with the SEC; monthly reports to the Fed

Question 13

Who selects the board of directors of a corporation?

Accepted Answer

A)  the stockholders 
B)  the bondholders 
C)  upper management 
D)  all of the above 
A)  the stockholders 
B)  the bondholders 
C)  upper management 
D)  all of the above

Question 14

Arturo wants to start a business where he is the chief executive officer and the company does issue stock.The type of business Arturo wants to start is a

Accepted Answer

A)  sole proprietorship. 
B)  partnership. 
C)  corporation. 
D)  Any of the above could be correct. 
A)  sole proprietorship. 
B)  partnership. 
C)  corporation. 
D)  Any of the above could be correct.

Question 15

Despite a shaky start, online used car seller Carvana sold all 15 million stock shares in its IPO and raised about $225 million. Initially priced at $15 per share, the stock closed at $11.10 per share at the end of the first trading day. The Phoenix-based company, known for its automated car vending machines, offers free next-day delivery to residents in 24 markets across the United States. Carvana, founded in 2012, has seen large revenue growth but has never reported a profit., losing about $93 million in 2016. The company also said in its S-1 IPO filing that it expects losses to continue in the near future.
Source: Kirsten Korosec, "Used Car Vending Machine IPO Sputters In First Day of Trading," Fortune, April 28, 2017.
-When Carvana sold stock to the public in its IPO,it did so through the New York Stock Exchange.This is an example of Carvana raising funds through

Accepted Answer

A)  reinvesting retained earnings. 
B)  a financial intermediary. 
C)  dividend reinvestment. 
D)  a financial market. 
A)  reinvesting retained earnings. 
B)  a financial intermediary. 
C)  dividend reinvestment. 
D)  a financial market.

Question 16

Anything of value owned by a person or a firm is

Accepted Answer

A)  an asset. 
B)  a liability. 
C)  wealth. 
D)  owner's yield. 
A)  an asset. 
B)  a liability. 
C)  wealth. 
D)  owner's yield.

Question 17

Yolanda wants to expand her microbrewery business by buying out a competitor and is going to sell newly-issued corporate bonds to do so.This is an example of using ________ for her expansion plans.

Accepted Answer

A)  direct finance 
B)  indirect finance 
C)  coupon payments 
D)  retained earnings 
A)  direct finance 
B)  indirect finance 
C)  coupon payments 
D)  retained earnings

Question 18

Define a corporation.

Accepted Answer

A corporation is a legal form

Question 19

How can a corporation's board of directors and its managers try to reduce the principal-agent problem?

Accepted Answer

A corporation's board of directors can t

Question 20

An increase in liabilities will reduce a firm's net worth.

Accepted Answer

A) True 
 B)False

In the United States,________ percent of all firms are corporations.

In the United States,________ profits are taxed at both the corporate level and when investors receive dividends.

An unusual feature relating to corporate governance at Snapchat is that stock shares sold during its IPO

What does limited liability mean?

Unlike a sole proprietorship,a corporation's shareholders

Direct finance refers to the flow of funds from savers to borrowers through financial markets.

Stockholders are the owners of which type of business?

Veruca sells therapeutic bath salts on the Internet.Her annual revenue is $52,000 per year,the explicit costs of her business are $14,000,and the opportunity costs of her business are $17,000 per year.What are the implicit costs of her business?

Which of the following would explain why accounting profit might be greater than economic profit?

Harry's Hookahs incurs $700,000 per year in explicit costs and $500,000 in implicit costs.The company earns $1.4 million in revenues and has $3.7 million in net worth.Based on this information,what is the accounting profit for Harry's Hookahs?

Dividends are the interest rates paid on stocks.

Firms disclose financial statements in and in .

Who selects the board of directors of a corporation?

Arturo wants to start a business where he is the chief executive officer and the company does issue stock.The type of business Arturo wants to start is a

Anything of value owned by a person or a firm is

Yolanda wants to expand her microbrewery business by buying out a competitor and is going to sell newly-issued corporate bonds to do so.This is an example of using ________ for her expansion plans.

Define a corporation.

How can a corporation's board of directors and its managers try to reduce the principal-agent problem?

An increase in liabilities will reduce a firm's net worth.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

Exam 6: Firms, The Stock Market, and Corporate Governance

In the United States,________ percent of all firms are corporations.

In the United States,________ profits are taxed at both the corporate level and when investors receive dividends.

An unusual feature relating to corporate governance at Snapchat is that stock shares sold during its IPO

What does limited liability mean?

Unlike a sole proprietorship,a corporation's shareholders

Direct finance refers to the flow of funds from savers to borrowers through financial markets.

Stockholders are the owners of which type of business?

Veruca sells therapeutic bath salts on the Internet.Her annual revenue is $52,000 per year,the explicit costs of her business are $14,000,and the opportunity costs of her business are $17,000 per year.What are the implicit costs of her business?

Which of the following would explain why accounting profit might be greater than economic profit?

Harry's Hookahs incurs $700,000 per year in explicit costs and $500,000 in implicit costs.The company earns $1.4 million in revenues and has $3.7 million in net worth.Based on this information,what is the accounting profit for Harry's Hookahs?

Dividends are the interest rates paid on stocks.

Firms disclose financial statements in ________ and in ________.

Who selects the board of directors of a corporation?

Arturo wants to start a business where he is the chief executive officer and the company does issue stock.The type of business Arturo wants to start is a

Anything of value owned by a person or a firm is

Yolanda wants to expand her microbrewery business by buying out a competitor and is going to sell newly-issued corporate bonds to do so.This is an example of using ________ for her expansion plans.

Define a corporation.

How can a corporation's board of directors and its managers try to reduce the principal-agent problem?

An increase in liabilities will reduce a firm's net worth.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

Firms disclose financial statements in and in .